British Pound Rejected at Resistance

British Pound Rejected at Resistance

In this series we scale-back and look at the broader technical picture to gain a bit more perspective on where we are in trend. The British Pound is down nearly 2% from the late-February highs against the US Dollarwith Sterling on pace to post a fifth consecutive daily decline today in New York. The losses come on the back of last week’s reversal from technical resistance and leaves the Pound vulnerable to further losses near-term. These are the updated targets and invalidation levels that matter on the GBP/USD weekly chart.

GBP/USD Weekly Price Chart

Notes: In last month’s GBP/USD Weekly Technical Outlook we noted that Sterling was approaching a, “critical support confluence at 1.2738/54 – a region defined by the 2019 open & the 61.8% retracement of the yearly range and converges on the 25%-line of the ascending pitchfork formation extending off the August / January lows. IF price is going to make a near-term recovery, this would be a good spot to watch.”We added that a breach above resistance at 1.3205 was, “needed to mark resumption of the January breakout. Such a scenario would have us targeting subsequent resistance objectives at the December 2017 low at 1.33.”

Price registered a low at 1.2773 before reversing sharply with the advance failing last week after probing through confluence resistance at the 1.33-handle. Note that weekly momentum divergence into the most recent high highlights the risk for a move lower here within the broader uptrend. Look for initial support along the median-line, currently ~1.3050s backed by the 25% line around ~1.2830s – an area of interest of possible exhaustion / long-entries IF reached.

Key support & broader bullish invalidation rests at 1.2754/89. A topside breach / close above 1.33 is needed to mark resumption targeting the 2017 high-week close at 1.3494 and the key resistance at the upper parallel / 61.8% retracement / 2016 high-week close at 1.3638/75.

Bottom line: The threat remains for further loses in the British Pound within the confines of ascending formation we’ve been tracking off the 2018 & 2019 lows. From a trading standpoint, we’ll be on the lookout for possible downside exhaustion on a move towards the lower parallel to offer more favorable long-entries. I’ll publish an updated GBP/USD Price Outlook once we get further clarity in near-term price action.

GBP/USD Trader Sentiment

Long positions are 0.2% higher than yesterday and 6.9% higher from last week

Short positions are 14.6% lower than yesterday and 26.9% lower from last week

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBP/USD prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger GBP/USD-bearish contrarian trading bias from a sentiment standpoint